Don't raise taxes; dip into 'rainy day' fund

Baltimore Sun

As the city teeters under prodigious budget shortfalls, raising property taxes might appear to be a tempting option for the new mayor. But nothing could be more harmful to the city, said Baltimore-based economist Anirban Basu.

"Any increase to the city's tax rate would accelerate the exodus of taxpayers from Baltimore City and damage the city's ability to sustain its tax base," said Basu, the chief executive of Sage Policy Group, an economic and consulting firm.

Rather, Stephanie C. Rawlings-Blake must make painful cuts to services - downsizing city government at all levels - and generate revenue by creating a land bank to expedite the sale of vacant properties, Basu said. But she should avoid raising taxes at all costs.

"If people are told they have to pay $1 more for a gallon of milk, it would not generate as much outrage as if people were told they had to pay $1 more for city services," said Basu.

The Dixon administration made sweeping cuts to trim $60 million from the city's $2.3 billion budget, but the city will still fall short an estimated $50 million for this budget year. And the next fiscal year promises to be worse.

Rawlings-Blake should consider tapping into the city's $100 million "rainy day" fund if there are no other alternatives to raising taxes, Basu said.

"Normally I would caution against dipping into such a fund - it's the city's insurance, key to maintaining the city's bond rating," he said. "However, I think people would agree it's now raining."

As she takes the reins of the city, Rawlings-Blake should warn taxpayers that navigating tight economic times without major cuts should be considered a victory.

"If she is able to manage the city through these difficult times without raising taxes or significantly diminishing the quality of life, she will be viewed as a profoundly excellent mayor," Basu said. "And that will increase her chance of being re-elected."

HER RECORD

Last year, Rawlings-Blake became the first council president in a decade to reject the mayor's proposed budget, saying it cut too deeply into recreation centers, pools and other programs. Instead, she pushed through cuts to the Mayor's Office of International and Immigrant Affairs, Cable and Communications and the inspector general's office. Last month, she held a hearing on the looming budget crisis. She has criticized the cost-saving measure of rolling closures of fire companies.

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